From the desk of Joe Rios
The Euro fell broadly after Greece said it would temporarily close banks on Monday in an attempt to prevent its banking system from collapsing after international creditors refuse to extend the country’s bailout. Greece’s banks, afloat by emergency funding from the European central bank are on the frontline as Greece moves toward defaulting on a €1.6 billion payment due to the international monetary fund on Tuesday. Expect volatility in the week ahead, not only from the dramatic escalation of the Greek debt crisis but also from a busy economic data calendar squeezed in a short holiday week.
Last week the grains market provided bullish opportunities with wheat leading 14.97% higher, corn 9.2% and soybeans 4.27 %. In the metals market copper rallied 3.15% while gold dropped -2.35% and silver -2.26%. Global stocks were weaker, led by the Shanghai composite index dropping -7.4% on Friday, taking its decline from its June 12 high to -19%. China’s central bank reacted by cutting its benchmark lending rate to a record low and lowered reserve requirement ratios for some lenders after local government bonds sales drained liquidity.
In the week ahead I expect the currency market to lead the way to a rise in volatility across the broad markets. Before placing currency trades check with your broker for the potential of higher margins, especially on the euro currency pairs in the Forex market. Should we see extreme volatility, then some brokers may limit euro trading to the closing of existing positions and not allow you to open new positions. Pay special attention to the spread between the bid and offer, as Forex dealers may widen the spread in an attempt to lower their risk. A number of major online brokerage firms lost millions in the 10 minute surge in the Swiss franc on January 15. I will also focus on correlations analysis as a guide to rotation flows. I expect a flight to safe haven assets across the global markets, therefore risk assets should flow to US Treasuries and gold. The Japanese yen should also rise from the unwinding of carry trades. Throughout the week keep your attention on the rotation flows as positions may eventually begin to unwind, providing new trading opportunities.
Joe Rios
Founder & Chief Strategist
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Monday
8:30 AM CAD RMPI
10:00 AM USD Pending home sales
9:00 PM NZD ANZ business confidence
Tuesday
2:00 AM EUR German retail sales
3:55 AM EUR German unemployment change
4:30 AM GBP Current-account
4:40 AM AUD RBA Gov. Stevens speaks
5:00 AM EUR CPI flash estimate
all day EUR Euro group meetings
8:30 AM CAD GDP
9:45 AM USD Chicago PMI
10:00 AM USD CB consumer confidence
9:00 PM CNY Manufacturing PMI
9:30 PM AUD Building approvals
9:45 PM CNY HSBC final manufacturing PMI
Wednesday
4:30 AM GBP Manufacturing PMI
8:15 AM USD ADP nonfarm employment change
10:00 AM USD ISM manufacturing PMI
10:30 AM CL Crude oil inventories
9:30 PM AUD Trade balance
Thursday
4:30 AM GBP Construction PMI
8:30 AM USD Nonfarm employment change
10:30 AM NG Natural gas storage
9:30 PM AUD Retail sales
Friday
US Bank Holiday
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